The official Nigeria Autonomous Foreign Exchange Market witnessed a surge in foreign exchange transactions, reaching a staggering $584 million, as reported by data from the FMDQ Exchange on Tuesday. This marks a significant increase from the $440 million daily transaction volume previously recorded on the platform.
Simultaneously, the national currency faced a depreciation against the United States dollar at the official market, closing at N1433 per dollar, compared to N1419 per dollar recorded on Monday.
The heightened forex turnover signals improved liquidity in the market, attributed to efforts by the Central Bank of Nigeria (CBN) to stabilize the foreign exchange rate. Apart from commercial banks, entities such as the CBN, oil firms, and multinationals also engage in dollar transactions at the Nigerian Autonomous Foreign Exchange Market.
Last week, the CBN implemented new circulars and guidelines aimed at enhancing liquidity and narrowing the gap between parallel and official exchange rates. In a significant move, the apex bank directed banks to adjust their foreign exchange exposures to mitigate risks associated with large foreign currency positions.
Under the circular titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” the CBN mandated that banks’ Net Open Position (NOP) should not exceed 20 percent short or 0 percent long of the bank’s shareholders’ funds moving forward. Those who surpassed this limit were given a deadline of February 1, 2024, for compliance.
In response to the adjustments, the national currency experienced three consecutive gains at the official market, closing at N1,455.59 per dollar on Wednesday, N1,445 per dollar on Thursday, and N1435.53 per dollar on Friday last week.
However, following Tuesday’s trading, the naira witnessed a marginal depreciation of 0.85 percent, with the dollar quoted at N1,433.89, compared to N1,421.70 on Monday at the Nigerian Autonomous Foreign Exchange Market.
At the parallel market, the dollar was traded between N1,480 and N1,485, according to a Bureau De Change Operator, Abubakar Taura, while another operator, Suraju, lamented the exorbitant price of the dollar, refraining from trading due to affordability concerns.
Despite the current fluctuations, economic managers remain optimistic about the naira’s stability in both markets in the forthcoming days.
